Heyer Products v. United States | Kessler, Gilmore & Kronman | August 29, 2012


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by Kessler, Gilmore & Kronman

HEYER PRODUCTS CO. v. UNITED STATES, 135 Ct. Cl. 63, 140 F. Supp. 409 (1956). The Army's Ordnance Tank Automotive Center (OTAC) requested bids for the manufacture of a quantity of low-voltage circuit testers. The plaintiff alleged in a complaint against the United States that the Center had rejected the plaintiff's bid in "bad faith," having decided to retaliate against the plaintiff for testifying against the contracting agency at a senate hearing. The plaintiff claimed in addition to his expenses in preparing the bid ($7,000), a sum of $38,000 to compensate him for his lost profits. The court denied the Government's motion to dismiss.


"The advertisement for bids was, of course, a request for offers to supply the things the Ordnance Department wanted. It could accept or reject an offer as it pleased, and no contract resulted until an offer was accepted. Hence, an unsuccessful bidder cannot recover the profit he would have made out of the contract, because he had no contract.


"But this is not to say that he may not recover the expense to which he was put in preparing his bid.


"It was an implied condition of the request for offers that each of them would be honestly considered, and that that offer which in the honest opinion of the contracting officer was most advantageous to the Government would be accepted. No person would have bid at all if he had known that 'the cards were stacked against him.' No bidder would have put out $7,000 in preparing its bid, as plaintiff says it did, if it had known the Ordnance Department had already determined to give the contract to the Weidenhoff Company. It would not have put in a bid unless it thought it was to be honestly considered. It had a right to think it would be. The Ordnance Department impliedly promised plaintiff it would be. This is what induced it to spend its money to prepare its bid. . . .


"The facts in United States v. Purcell Envelope Co., 249 U.S. 313, 39 S. Ct. 300, 301,63 L. Ed. 620, differ from the facts in this case in that in that case plaintiffs bid was accepted. But after acceptance the head of the department refused to execute the written contract. Plaintiff sued and the Government defended on the ground that discretion rested in the department head to choose with whom it would contract, and that it had chosen not to contract with plaintiff, and, hence, plaintiff had no legal capacity to sue.


"The court held that a contract resulted from the offer and acceptance and that the subsequent signing of a written contract was not required.


"The facts in the two cases are, therefore, different, but in the course of its opinion the Supreme Court used this language, which is applicable to the present case:


"There must be a point of time at which discretion is exhausted. The procedure for the advertising for bids for supplies . . . to the government would else be a mockery — a procedure, we may say, that is not permissive but required . . . . By it the government is given the benefit of the competition of the market and each bidder is given the chance of a bargain.   It is a provision, therefore, in the interest of both government and bidder, necessarily giving rights to both and placing obligations on both.  And it is not out of place to say that the government should be animated by a justice as anxious to consider the rights of the bidder as to insist upon its own.


"The cases we cited in the beginning of this opinion hold that acts requiring advertising and letting to the lowest responsible bidder confer no right on the bidder to secure the contract, whether or not he is the lowest responsible bidder, and, hence, he may not recover his loss of anticipated profits. We do not understand the Supreme Court in the Purcell Envelope case, supra, to have intended to hold to the contrary, but it did definitely recognize that the bidder had certain rights, and that the Government was under an obligation to respect those rights.


"Among these rights is the right to have his bid honestly considered. The Government is under the obligation to honestly consider it and not to wantonly disregard it. If this obligation is breached and plaintiff is put to needless expense in preparing its bid, it is entitled to recover such expenses."


Two judges dissented from the majority opinion: Judge Madden would have read the Armed Services Procurement Act of 1947 (41 U.S.C.A. §151(b)) as affording plaintiff the right to recover any damages he may have suffered. Judge Laramore, however, regarded the action as one sounding in tort (since it was founded on fraud) and therefore outside the original jurisdiction of the Court of Claims.


Annotated Text Information

June 02, 2014 Heyer Products v. United States Heyer Products v. United States

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